A question that is always asked and played with in movies, at family dinners, and in our popular culture is can money buy happiness? We will all say that the answer is no, especially when we hear about a wealthy person who commits suicide or has their life unravel in a public manner. Nevertheless, we all pursue a relatively high level of wealth and income, and we recognize that having more money would mean that we could eat out more often, take more vacations, and buy more things. There does seem to be some level of happiness that can be achieved through more money.
Daniel Kahneman shared research on the question in his book Thinking Fast and Slow. He writes, “an analysis of more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 Americans, provides a surprisingly definite answer to the most frequently asked question in well-being research: Can money buy happiness? The conclusion is that being poor makes one miserable, and that being rich may enhance one’s life satisfaction, but does not (on average) improve experienced well-being.”
Kahneman’s quote is incredibly helpful because it splits apart happiness and well-being, particularly our experienced happiness and general well-being. The part of our brain that reflects back on our life and our overall happiness is not the same part of our brain that actually lives the experiences we have. As Kahneman showed earlier in the book, asking students how happy they are and then asking them how many dates they had in the last month gives you two separate responses with no correlation, but ask the questions in reverse, and suddenly those students who haven’t had many dates tend to respond that they are less happy. The reflecting part of our brain will experience happiness differently depending on the frames you place it in. The same thing seems to happen with happiness, well-being, and money.
When we think about how happy we are overall, we pause, reflect on our living condition, think about our relative success compared to others, and remember the fun events in our lives. Our happiness is improved when we are more sure of ourselves based on our relative social status and as we have more enjoyable and memorable experiences. However, this doesn’t mean that we are more happy than other people in our experienced well-being from moment to moment.
The rich person may feel isolated, may be insecure about losing their wealth, or may have the same family and social problems that anyone else has. The momentary emotional status of an individual is not impacted by wealth as much as our reflective happiness. Kahneman’s quote helps to pull these two aspects of happiness apart to see what is happening and understand the role of money. Kahneman continues to write that experienced well-being stops increasing as dramatically once an individual’s household income reaches about $75,000 in high cost areas. Subjectively, in the course of our lives, money doesn’t make us happier from moment to moment once we have received a high, but relatively reasonable income.